Current certified rent roll and rent rolls for the previous six months.

HAP contract, if applicable.

Occupancy history, by quarter for last three years.

A current title report which discloses all liens and encumbrances.

Audited balance sheets and operating statements for the last three years. If the prior year’s financial statements have not been audited, reviewed unaudited year-end statements certified by the borrower are acceptable.

Year-to-date financial statements. May be unaudited, but must be certified.

A survey affidavit confirming existing survey is correct or a new survey if changes have occurred.

Lead-based paint test report and certification if LBP was previously abated if project was built in 1978 or earlier.

Certified statement by borrower listing all outstanding obligations on project.

Deed of Trust Note or Mortgage Note.

Statement of escrow balances, signed by the borrower and lender as being true and correct.

Evidence of prepayment approval (Form 9807) or evidence of request from lender for approval.

Identification of two principals to sign for Regulatory Agreement Provision #50.

Disc or removable drive of the underwriting file, exhibits and third party reports.

Yes, HUD 223(a)(7) loans typically allow prepayment. However, there is often a 0-2 year lockout period, during which the loan cannot be prepaid at all, followed by an 8-10% declining prepayment penalty. This means that the prepayment penalty will decline by 1% each year, starting after the lockout period ends.

Just like other HUD multifamily loans, HUD 223(a)(7) loans are fully assumable subject to FHA approval and a fee of 0.05% of the original FHA-insured loan amount. The fact that these loans are assumable can be a significant benefit to borrowers; especially those who want to sell their property after a few years. This is because having a new borrower assume the loan prevents the previous borrower from having to pay a prepayment penalty.

In general, the HUD 223(a)(7) loan program does not allow for cash out refinancing. Instead, the 223(a)(7) loan can only finance certain eligible costs, including 100% of the property’s existing mortgage, third-party reports, minor/moderate property repairs, replacement reserves, prepayment penalties (if the borrower is paying off their HUD multifamily loan early), and certain other costs. Borrowers who wish to get cash out from a multifamily property may wish to look towards other types of financing, such as a CMBS loan.

HUD 223(a)(7) loans require a HUD application fee (0.3% of the loan amount) which is due at application. Half of this is refunded after closing. Other fees and costs for the HUD 223(a)(7) program are usually capped at 2.0%.

Without a doubt, the HUD 223(a)(7) loan process is faster and has fewer hoops than other FHA/HUD products. The streamlined, affordable process does not require new third-party reports like appraisals, market studies, or environmental reports. In fact, most 223(a)(7) refinances only require a project capital needs assessment (PCNA).

The HUD 223(a)(7) refinance loan program can reduce interest rates, increase amortization, and improve cash flow while reducing the cost of debt service. It can even absorb prepayment penalty costs. On top of all that, it is one of the fastest, easiest, and most affordable multifamily or healthcare loans that you can get.